SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Manuel Ulrich, Tax Partner AG
Tax Partner AG Talstrasse 80
8001 Zurich Switzerland Tel: +41 44 215 77 77 Email: taxpartnerinfo@taxpartner.ch Web: www.taxpartner.ch
1. Rules Governing Transfer Pricing 1.1 Statutes and Regulations Preliminary Remarks Switzerland has no specific codified transfer pricing law. Consequently, there are no transfer pricing-spe - cific regulations on the determination or documen - tation of transfer prices at either federal or cantonal level. The arm’s length principle is, nevertheless, recognised and substantiated by the practice of the Swiss Federal Tax Administration (SFTA) and case law. In addition, Switzerland has accepted the initial version and all updates of the OECD Transfer Pric - ing Guidelines (TPG) without reservation, including the latest update in 2023. Thus, there is full consen - sus in Swiss tax law practice that the OECD TPG are an important – although not binding – interpretative tool for the application of the arm’s length principle in Swiss tax law. The importance of the OECD TPG has been further underlined in several publications by the Swiss tax authorities, namely the SSK ( Sch- weizerische Steuerkonferenz ) and the SFTA regarding transfer pricing, as these publications largely rely on and basically summarise the OECD TPG. Further, the SFTA publishes and regularly updates a Q&A on spe - cific transfer pricing topics. Transfer pricing issues mainly arise in Switzerland in connection with federal and cantonal corporate income tax and federal withholding tax (WHT). How - ever, transfer pricing issues might also arise in con - nection with VAT – eg, in the event of retrospective transfer pricing adjustments and VAT impact at the level of the foreign related party. For corporate income tax, cantons assess and collect cantonal and munici - pal taxes and also assess direct federal tax, subject
to federal supervision. The federal government has the exclusive competence to levy withholding tax, stamp duties and VAT. With regards to withholding tax, in 2019 the SFTA established a competence centre for transfer pricing. It is therefore no surprise that, in practice, for withholding tax purposes, transfer prices are increasingly being critically scrutinised during tax audits. This concerns, in particular, the relocation of functions abroad and controlled transactions between Swiss companies and related companies domiciled in tax havens or low-tax countries. In general, Swiss withholding tax implications may be a substantial con - cern as a result of a transfer pricing adjustment done in tax audits. OECD TPG In exercising its supervisory role over the canton - al tax administrations, in 1997 and 2004 the SFTA instructed the cantonal tax administrations, through a circular letter, to directly apply the OECD TPG. The Federal Supreme Court (FSC) tends to apply a static approach regarding the version of the OECD TPG. This approach has recently been confirmed in an FSC ruling from 2024. Hence, the arm’s length principle and the methods for determining the relevant transfer prices will be assessed according to the OECD TPG as they were published at the time the transaction in question was settled. Statutes Corporate income tax From a corporate income tax perspective, the follow - ing two scenarios must be distinguished: • controlled transactions between a company and its shareholders; and
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